Reserved Instance Pricing: AWS, Azure, GCP Compared

Reserved Instances (RIs) can save you money on cloud computing costs if your workloads are predictable. AWS, Azure, and GCP each offer their own versions of RIs, but they differ in pricing, flexibility, and payment options. Here's the key takeaway:

• AWS: Offers up to 75% savings with flexible options like Standard and Convertible RIs. You can resell unused RIs via the AWS Marketplace. Best for businesses needing flexibility across regions and instance types.
• Azure: Provides up to 80% savings, especially for Windows-based environments using the Azure Hybrid Benefit. Monthly payment options make it easier to manage budgets. Ideal for organisations already invested in Microsoft technologies.
• GCP: Offers simple Committed Use Discounts (up to 70%) and automatic Sustained Use Discounts (up to 30%). No upfront payment is required. Best for straightforward, predictable workloads.

Quick Comparison

Each provider offers UK data centres, VAT-compliant billing, and regional pricing. Choose AWS for flexibility, Azure for Microsoft setups, or GCP for simplicity. Align your choice with your workload needs and payment preferences.

AWS Reserved Instances: Pricing and Features

AWS offers a flexible Reserved Instance programme designed to suit a variety of business needs. This programme combines substantial cost savings with adaptable commitment options, helping businesses optimise their cloud spending.

AWS Reserved Instance Types

AWS provides two main types of Reserved Instances: Standard Reserved Instances and Convertible Reserved Instances. Each caters to different business needs, with varying levels of savings and flexibility.

• Standard Reserved Instances: These offer the highest discounts but come with stricter limitations. While you can make some modifications, such as changing within the same region or instance family, you cannot switch the instance family, region, or tenancy. This makes them ideal for workloads with stable, predictable requirements that are unlikely to change during the commitment period.

• Convertible Reserved Instances: These provide more flexibility, though at slightly reduced discounts. You can exchange Convertible RIs for different instance families, operating systems, tenancies, or payment options throughout the term. This makes them a better choice for organisations anticipating growth or needing to adapt to changing technological requirements.

Both types are available with commitment terms of one year or three years, with three-year commitments offering greater discounts in exchange for a longer financial commitment.

AWS also provides three payment options: All Upfront (offering the largest savings), Partial Upfront, and No Upfront (offering the lowest discounts).

AWS Discounts and Flexibility Options

Reserved Instances can deliver savings of up to 75% compared to On-Demand pricing, depending on the instance type, commitment length, and payment method. The most significant discounts are achieved with three-year All Upfront commitments, while one-year No Upfront options still offer meaningful savings with less financial commitment.

The Reserved Instance Marketplace adds an extra layer of flexibility. If your needs change before your commitment ends, you can sell unused Reserved Instances to other AWS customers. Likewise, you can purchase RIs from other customers at potentially reduced rates, which can align better with your planning needs.

AWS also offers Reserved Instances with either a regional or zonal scope:

• Regional Reserved Instances: These provide flexibility in instance sizes across an entire region. For example, a reservation for one m5.2xlarge instance could cover two m5.xlarge instances or four m5.large instances, giving you operational adaptability without needing separate reservations for each size.

• Zonal Reserved Instances: These are tied to specific Availability Zones and include capacity reservations but lack the instance size flexibility of regional options.

These features provide a strong foundation for understanding how AWS Reserved Instances can be tailored to specific regional needs, including those in the UK.

AWS UK Pricing and Regional Details

In the UK, AWS adapts its Reserved Instance programme to local requirements while maintaining its core flexibility. The London region (eu-west-2) serves as the primary hub for UK-based workloads, particularly those requiring compliance with data residency regulations. However, Reserved Instance pricing in the London region tends to be higher than in US regions, reflecting local infrastructure and operational costs.

VAT considerations are crucial for UK businesses. AWS applies a 20% VAT charge on all services, including Reserved Instance purchases. For All Upfront payments, this VAT is due immediately, which can impact cash flow. While businesses can reclaim the VAT through standard procedures, the timing of the reclaim may affect working capital.

Currency fluctuations also play a role in Reserved Instance planning for UK customers. AWS primarily bills in US dollars, exposing customers to exchange rate risks, especially with longer three-year commitments. Although AWS offers some local currency billing options, many UK businesses still face these challenges.

The London region supports the full range of AWS instance types and Reserved Instance options, ensuring UK organisations have access to the same features as other regions. However, pricing differences and occasional delays in the launch of newer instance types in the London region may influence the timing of Reserved Instance purchases.

Azure Reserved VM Instances: Pricing and Features

Microsoft Azure has stepped up to offer its own reserved VM programme, following the example set by AWS. Designed to deliver cost savings and operational flexibility, Azure's reserved capacity programme caters to businesses with long-term workload needs.

Azure Reserved VM Instance Overview

Azure Reserved VM Instances are available on one-year or three-year terms, providing an opportunity for significant savings. Businesses can make use of the Azure Hybrid Benefit, which combines existing Windows Server and SQL Server licences to further cut costs. Payment options are flexible, including All Upfront, Monthly, or hybrid choices. The monthly plan spreads costs without any added interest, making it easier to manage budgets.

The programme also offers scope flexibility, allowing businesses to apply reservations to either a single subscription or multiple subscriptions under a billing account. Additionally, Azure Reservations feature instance size flexibility within the same VM series, enabling organisations to adjust their reserved capacity as workload demands change. These features make Azure's offerings highly adaptable to evolving business needs.

Azure Discount Ranges and Policies

Azure Reserved VM Instances provide discounts compared to pay-as-you-go pricing, with the most substantial savings available for longer commitments and upfront payments. The exact discount levels vary depending on the VM series and region, but Azure's pricing tools allow users to estimate their potential savings before making a purchase.

If business needs change, reservations can be cancelled or exchanged, though fees may apply. For added convenience, an automatic renewal option ensures that reservations continue at current market rates without requiring manual action, helping businesses maintain their cost savings seamlessly.

Azure UK Regional Pricing and Benefits

Azure offers dedicated UK regions to meet local needs, with billing in pounds sterling and compliance with UK standards. The two primary regions - UK South (London) and UK West (Cardiff) - both support Azure Reserved VM Instances, though pricing may differ slightly between them.

Azure's per-second billing ensures that users only pay for the exact runtime of their virtual machines, helping to avoid unnecessary costs for unused hours. VAT at 20% is clearly itemised on invoices, and the monthly payment option helps businesses manage upfront expenses more effectively.

Azure also meets stringent compliance requirements, holding certifications such as ISO 27001, SOC 2, and those specific to UK government standards. For financial tracking, Azure Cost Management tools provide detailed reports on reserved instance usage and savings in pounds sterling. This local billing approach minimises currency risks and helps finance teams accurately measure return on investment.

Google Cloud Committed Use Discounts: Pricing and Features

Google Cloud Platform (GCP) takes a unique approach to reserved capacity with its Committed Use Discounts (CUDs) programme. Instead of following a traditional model, GCP allows businesses to commit to resource usage in exchange for discounts, offering a level of flexibility that stands out in the cloud services market.

Committed Use Discounts vs. Sustained Use Discounts

GCP offers two discount programmes designed to reduce costs: Committed Use Discounts and Sustained Use Discounts. With CUDs, businesses agree to use a specific amount of vCPU and memory for a one- or three-year period. These resources can be applied flexibly across different machine types. On the other hand, Sustained Use Discounts are automatically applied to instances that run for a significant portion of the month, reducing costs without requiring any upfront commitment. When used together, these programmes can deliver substantial savings, especially for workloads that are predictable and long-running.

GCP Discount Ranges and Payment Options

Committed Use Discounts provide notable cost reductions compared to on-demand pricing, with longer commitments typically offering better rates. The exact savings depend on factors like the machine family and region. To help businesses plan, GCP offers a pricing calculator, which makes it easier to estimate potential savings. Unlike some providers that charge by the hour, GCP uses per-second billing, ensuring companies only pay for the exact time they use.

This commitment model is also designed with flexibility in mind. Businesses can reallocate their committed resources within the same region, adapting to changing needs without losing the benefits of their discount.

GCP UK Pricing Considerations

For UK-based customers, GCP operates its europe-west2 region in London, offering low-latency access for local workloads. Billing is handled in pounds sterling, with VAT clearly itemised on invoices. This eliminates the hassle of currency conversions and simplifies financial planning for businesses operating in the UK.

GCP's pricing is straightforward - published prices include software licences for standard operating systems, and the cost calculator provides estimates that align closely with actual charges. The Cloud Billing console further enhances transparency, offering detailed cost breakdowns in pounds sterling. This allows finance teams to monitor spending and plan for future capacity with confidence.

Google Cloud’s reserved capacity pricing prioritises both flexibility and simplicity. Sustained Use Discounts deliver immediate savings on long-running workloads, while Committed Use Discounts offer additional reductions for businesses with predictable resource needs.

AWS vs Azure vs GCP: Reserved Instance Pricing Comparison

Let’s dive into how the reserved instance pricing from AWS, Azure, and GCP stacks up. For UK businesses, it’s essential to weigh up the discounts, payment options, and flexibility offered by each provider.

Feature Comparison Table

Here’s a closer look at the strengths and challenges of each provider, helping you decide which one aligns best with your business needs.

Pros and Cons of Each Provider

AWS offers a well-rounded reserved pricing model, combining Reserved Instances with Compute Savings Plans. The flexibility of Savings Plans allows you to switch between instance types, sizes, and regions, potentially saving up to 66%[1]. Plus, the option to resell unused reservations on the AWS Marketplace adds an extra layer of financial flexibility. That said, the complexity of AWS pricing might be overwhelming for smaller businesses without dedicated resources to manage cloud costs.

Azure shines in Windows-based environments. With the Azure Hybrid Benefit, you can save up to 80% on Windows Server and SQL Server workloads[2]. Azure’s Savings Plans also provide up to 65% discounts with flexibility across different VM types and regions[1]. The introduction of monthly payment options makes it easier for UK businesses to manage budgets. However, the 12% cancellation fee can be a drawback for organisations that may need to adjust their commitments[1].

GCP takes a straightforward approach with Committed Use Discounts (CUDs), offering savings of 55–70% without upfront payments[1]. Automatic Sustained Use Discounts, which can reach up to 30%, deliver immediate cost benefits without any long-term commitment. Combined with per-second billing, GCP is a great option for predictable workloads. However, GCP’s lack of flexibility - such as the inability to cancel commitments and the requirement for region-specific reservations - can be a limitation compared to AWS and Azure.

When to Choose Each Provider

Choose AWS if your business needs maximum flexibility and advanced cost management tools. It’s ideal for organisations running diverse workloads across multiple regions or those planning significant infrastructure changes. AWS’s marketplace resale option also provides added financial agility.

Choose Azure if your company is heavily invested in Microsoft technologies. For businesses using Windows Server, SQL Server, or other Microsoft products, Azure’s Hybrid Benefit can result in considerable savings. Additionally, Azure’s monthly payment model is a good fit for organisations looking to avoid large upfront costs.

Choose GCP if simplicity is your priority, especially for predictable workloads. GCP’s automatic Sustained Use Discounts optimise costs without requiring much hands-on management. Its per-second billing is particularly useful for workloads with variable runtime patterns, helping to keep cash flow steady.

For UK businesses, all three providers offer local data centres and billing in sterling. These pricing comparisons are tailored to UK-specific conditions, ensuring you can align your reserved instance strategy with your business goals effectively.

Getting the Most Value from Reserved Instances

To maximise savings with reserved instances (RIs), it’s essential to align them with your actual usage patterns and business goals.

Matching RIs with Business Goals

Analyse past usage to plan commitments. Review your workload trends over the last six months. For stable, predictable workloads, a three-year commitment often delivers the best savings. On the other hand, for fluctuating or seasonal workloads, shorter one-year terms or flexible options may be more appropriate.

Consider future technology plans. If your organisation is gearing up for major changes like expansion or migration, flexibility is key. However, if your workloads are steady and predictable, longer commitments can provide better discount rates.

Match your strategy to your tech stack. Take into account regional and regulatory requirements when deciding on your commitment strategy. This ensures compliance and avoids potential disruptions.

If this process feels overwhelming, seeking expert advice can help you make informed decisions and simplify the complexity.

Getting Expert Help

Aligning reserved instances with your business needs is just the start. Expert guidance can take your strategy further, especially when managing RIs across multiple cloud platforms.

Hokstad Consulting offers tailored cloud cost engineering services to help UK businesses lower cloud expenses. Their expertise includes:

• Cloud cost audits to uncover the best RI opportunities.
• Strategic migration planning that integrates long-term RI commitments.
• Ongoing monitoring to ensure your RIs continue delivering value.

With their No Savings, No Fee model, you only pay if actual cost reductions are achieved. This makes it a risk-free way to optimise your cloud costs.

For hybrid and multi-cloud environments, expert assistance is particularly valuable. Comparing discount structures and flexibility across providers can be challenging, and professional input ensures you’re making the right choices.

Key Takeaways

• Reserve capacity for predictable workloads to unlock substantial savings.
• Each cloud provider offers unique advantages:
  • AWS: Flexible Savings Plans and marketplace options.
  • Azure: Ideal for Microsoft-centric setups with its Hybrid Benefit.
  • GCP: Simple, automatic discounts with no upfront payments.
• Payment flexibility varies:
  • Azure allows monthly payments, helping manage cash flow.
  • GCP requires no upfront payments, offering additional ease.
  • AWS may provide larger discounts for upfront payments.
• Be aware of cancellation policies - breaking a commitment can result in additional costs, so plan carefully.

FAQs